Take-Two: A Classic Pullback

Take-Two Interactive (TTWO) has two of the most anticipated game titles coming next year, that would be Grand Theft Auto 5 (GTA V) and Bioshock Infinite. Its why Mastery wants in before the stock takes off.

Plagued by management issues, Carl Icahn takeover balks, and volatile stock swings makes Take-Two a risky investment for most investors. TTWO has been called a one trick pony for years thanks to its Grand Theft Auto franchise. However if your one trick is only GTA -- its a damn good one. The last two releases of Grand Theft Auto have banked some major revenue. GTA San Andreas (GTA 3) raked in around $850 million and Grand Theft Auto IV (GTA 4) took in over $1.35 billion.

Last Wednesday (Dec 12th) Take-Two received an upgrade by Piper Jaffray and it stock price jumped. Piper raised their price target on Take-Two (TTWO) shares from $12 to $18. They aren't excited about the next few months but believe 2013 will greatly improve once GTA V and Bioshock Infinite are ready for the masses. Earlier this month Take-Two was just over $12 a share, it popped to $13.20 last week on Piper's upgrade. Since that time with zero news TTWO shares have backed down over $1 and today closed down 5.7% to $11.98.

1 Month Movement on TTWO

For TTWO shares to return to $13 from this point is a gain of $1 or 8.5%. If Piper is right then by this time next year Take-Two should be around $18 which implies a 50% gain from its current level. Take-Two hasn't been at $18 since the stock market crash of 2008. Back in 2008 is the last time Take-Two had a GTA release (GTA IV was released that year) which took its stock price above $20.

Take-Two finally has another installment of GTA ready to be released in 2013 (GTA V). Take-Two should have a decent holiday season with game titles Borderlands 2 and NBA 2K in stores. Add to it we have another GTA release in the coming year and its time for serious consideration.

TTWO shares have outperformed the market leading up to prior GTA launches. Assuming a Jun-13 quarter launch, we are approximately 6 months away from GTA V shipment. Although past performance is not necessarily indicative of future performance, Piper notes that in the past 3 GTA launches, TTWO shares have materially outperformed the market in the 6 months prior to shipment. Specifically, TTWO shares appreciated, on average 32% in the 6 months prior to launch in the last 3 versions, while the NASDAQ was, on average, down - 14% during the same time periods. Outperformance for TTWO vs. the market was material and consistent in each of these 3 periods (see table below) and the least amount of relative outperformance was 32 percentage points.

Bottom line: Before you check out for the holidays, its time to review TTWO shares and consider what the new year may bring.